A principled ESG fund will therefore present investments that are at the intersection of financial performance and social or environmental good, so that investors can align their values with those opportunities.
As Tariq Fancy describes in The Secret Diary of a Sustainable Investor, think of a Venn diagram where purpose and profit seek to intersect — that intersection constitutes the ESG integration approach for social and environmental good.
For ESG to continue to grow and succeed, the intersection in that Venn diagram needs to expand. Financial firms, companies, rating agencies and other intermediaries need to collaborate to improve the consistency of data, the accuracy of marketing and continued standardizations in disclosures.
To be sure, there is greenwashing in ESG, and some companies take advantage of sustainability reports by, for example, highlighting only marginal efforts around stakeholder engagement without any change in their core operations. Governments and regulators should help define the space and provide oversight with respect to these practices.
We all need to speak, write and report more precisely around this topic. Conflating ESG, sustainability, impact and ethical investing can confuse the aims of adherents to each approach. The longevity of the movement depends on it.ESG Is Not ‘Ethical Investing.’ And That’s OK. | Kiplinger